Shares of Sierra Wireless (NASDAQ:SWIR) have popped today, up by 11% as of 3 p.m. EST, after the company received a bullish initiation from Wall Street. B. Riley Securities kicked off coverage of Sierra Wireless with a buy rating alongside a price target of $23.50, which represents over 40% upside from yesterday's close.
The tech company, which makes wireless communications modules that help power the Internet of Things (IoT), has had a rough few years, but analyst Josh Nichols believes that Sierra Wireless is setting the stage for a comeback.
"We believe SWIR is poised to execute a successful multiyear turnaround with an expanded and upgraded board following a shareholder activist campaign (agreement reached in April 2020)," the analyst wrote in a research note to investors. "While this turnaround is still in the early stages, we believe that improvements are well under way, with management now squarely focused on profitable growth."
Sierra Wireless recently sold its low-margin automotive module business, and Nichols is confident in the company's ability to strengthen profitability going forward as it improves its cost structure and turns its attention to "more focused" product offerings that can capitalize on growing areas within IoT. At the same time, Sierra Wireless is working to grow recurring revenue and services, which can help smooth out some of the quarterly lumpiness from hardware sales.
Nichols estimates that Sierra Wireless can expand its total addressable market by over fivefold in the years ahead.